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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Big Oil and Big Corn Form Alliance to Challenge Pro-EV Policies

  • The oil industry has not historically been a fan of ethanol and biodiesel makers.
  • Big Auto is now changing its ambitious plans of going all-electric in less than a decade.
  • A significant change to tailpipe emissions reduction standards could result in better cooperation between big corn and big oil.

The oil industry has not historically been a fan of ethanol and biodiesel makers. They're competition in a packed market. But now, the API, refiners, and biofuel producers are uniting in the face of a common enemy: the Biden administration that wants to make the EV revolution happen whatever it takes—including unrealistic fuel efficiency standards.

Earlier this month, the American Petroleum Institute filed a lawsuit at the D.C. Circuit Court of Appeals challenging the federal government's new fuel efficiency standards. Those call for carmakers to implement tailpipe emissions reductions of 50% by 2032 from 2026 levels by raising the required level of fuel efficiency for model years 2027-2032 to 50.4 miles to the gallon.

It's worth noting that the rule was revised under pressure from the carmaking industry, which was quick to protest the original target of 58 miles to the gallon as proposed by the National Highway Transportation Safety Administration. However, even an increase to 50.4 miles to the gallon would be a rather substantial one: currently, the fleetwide fuel efficiency average stands at 29.1 miles to the gallon.

The API and its former foes turned friends from the National Corn Growers Association and the American Farm Bureau Federation believe the purpose of this doubling of fuel efficiency is to force carmakers to sell more EVs, which would hurt their business and, they argue, the economy as a whole. Supporters of the rules from the federal government swear it does not amount to a mandate for EV sales.

"We designed the standards to be technology neutral and performance-based to give manufacturers the flexibility to choose which combination of pollution control technologies are best suited for their consumers," EPA administrator Michael Regan said, as quoted by Reuters, in March when the final rules were announced. He also emphasized there was 'absolutely no mandate" for EVs.

Related: Is Big Solar Beating Big Oil in 2024?

While there might not be a direct mandate, it is easy to see why the API and the biofuel industry see something of a mandate in the whole thing. Doubling the fuel efficiency of all cars that are made in the U.S. in three short years would be quite the undertaking—which the industry could and probably would have done voluntarily had there been a commercial point to it. So, from Big Oil's and Big Corn's perspective, the new rules essentially amount to a thinly veiled mandate for more EV sales because they are not taking off on their own.

"By approving tailpipe standards that focus exclusively on electric vehicles, EPA has ignored the proven benefits corn ethanol plays in reducing greenhouse gas emissions and combatting climate change," said the president of the National Corn Growers Association when his group and the API, plus half a dozen car dealerships, file their lawsuit.

Harold Wolle added that the NCGA had tried to make its case for ethanol to the EPA but "to no avail", making the next step inevitable. Because for the API and the ethanol and biodiesel makers, an EV mandate, however formulated, would mean losses—if it works.

This seems to be a possibility that the API, the NCGA and the other plaintiffs in what are now two lawsuits, are not entertaining. They don't need to, really. What they see is a threat to their livelihoods, so they are taking action to neutralize this threat. And they might get a strong new friend soon: the carmaking industry.

So far, carmakers have been mostly on board with the Biden administration's efforts to make electric cars a more frequent sight on American roads. In fact, for the most part, they have been vocally and enthusiastically on board—until the losses they are making on every EV that they sell started piling up.

Ford is losing $100,000 on every EV that it sells. GM booked a loss of $1.7 billion from its EV business for 2023. Stellantis made a profit from EV sales last year—because it sells them in Europe. It has yet to start selling EVs on the U.S. market where its cars may or may not qualify for the full stack of incentives the federal government offers EV makers.

Because of these figures, Big Auto is now changing its ambitious plans of going all-electric in less than a decade. Markets speak louder than transition advertisers, and what they are saying right now is that the majority of people don't want an EV yet. That's after billions in investments in electric car manufacturing capacities and a rush to secure the necessary materials and components for an all-electric future.

It may only be a matter of time before the car industry gets tired of emission reduction targets that would effectively squeeze its business with a load of additional costs. It may only be a matter of time before carmakers join the API and the NCGA, as well as the rest of those affected by the Biden admin's transition plans.

By Irina Slav for Oilprice.com

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